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Frequently Asked Questions
What different types of bankruptcy cases should I consider?
What property can I keep?
What will happen to my home and car if I file bankruptcy?
Will bankruptcy wipe out all my debts?
Will bankruptcy affect my credit?
How do I see my credit report?
What is a secured debt?
What is an unsecured debt?
What Different Types of Bankruptcy Cases Should I Consider?
There are a few types of bankruptcy provided under the law:
- Chapter 7 is known as "straight" bankruptcy or "liquidation."
- Chapter 12 allows family farmers to reorganize their debts and remain in business.
- Chapter 13 is called "debt adjustment".
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What Property Can I Keep?
You may keep all property which the law says is "exempt" from the reach of creditors. Exemptions are designed to let you keep property necessary for living. For example, if you chose the Vermont exemptions, you would be entitled to keep up to:
- $75,000 in equity in your home;
-$2,500 in household goods;
- $2,500 in equity in your car;
- $5,000 in tools of the trade (things you need for your job);
- $7,400 in any property;
- Your right to receive certain benefits such as social security, unemployment compensation, veteran's benefits, public assistance, and pensions--regardless of the amount.
-and others
The amounts of the exemptions are doubled when a married couple files together, with the exception of the homestead exemption.
In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.
You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity.
While your exemptions allow you to keep property even in a Chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a Chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn't file bankruptcy.
Call 1-800-863-2818 for more information.
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What Will Happen to My Home and Car If I File Bankruptcy?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt and you continue to keep your payments current. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13. Bankruptcy does not make these security interests go away. If you don't make your payments on a secured debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.
Call 1-800-863-2818 for more information.
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Will Bankruptcy Wipe Out All My Debts?
Yes, with some exceptions. Bankruptcy will not normally wipe out:
(1) money owed for child support or alimony, fines, and some taxes;
(2) debts not listed on your bankruptcy petition;
(3) loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
(4) debts resulting from "willful and malicious" harm;
(5) student loans owed to a school or government body, except if:
-- the court decides that payment would be an undue hardship;
(6) mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).
Call 1-800-863-2818 for more information.
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Will Bankruptcy Affect My Credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse.
The fact that you've filed a bankruptcy can appear on your credit record for seven to ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit. Requesting Your Credit Report
Call 1-800-863-2818 for more information.
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What is a secured debt
A secured debt is a debt owed to a creditor who has taken an interest in property that you own. For instance, when you have a car loan, the creditor may put a lien on your car to "secure" the payment of the debt you owe. If you fail to pay, the creditor has the legal right to take the car, or the collateral. With personal property like a car or computer, this is called repossession.
When you buy a home and borrow money to pay for it, the bank will put a lien on the home. This is called a mortgage and enables the bank to legally take the home if you fail to pay the debt (mortgage). With real property such as a home or a camp, this is called foreclosure. There are certain limitations to the bank's rights and method of foreclosing.
Call 1-800-863-2818 for more information.
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What is an unsecured debt:
By contrast, an unsecured debt is a debt you owe to a creditor which does not have any property backing it. The creditor has no "security" for the payment of its debt. This is one reason why unsecured creditors (credit card companies) are so aggressive in their collection efforts.
Call 1-800-863-2818 for more information.
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